AT&T's stock took a hit Tuesday after the company's CEO told investors that a weak economy is hurting the company's landline and broadband business.

Randall Stephenson, AT&T's CEO, said Tuesday during a Citigroup investor conference that the company was forced to cut off some of its broadband and landline customers in the consumer segment in the fourth quarter because they were not able to pay their bills. The news shook investors, and the stock dipped $1.87, or 4.5 percent, to $39.16 per share at the closing bell.

Stephenson was responding to a question posed by an analyst who asked whether the weak economy had affected AT&T's business. And essentially Stephenson, said yes it had.

"We're really experiencing some softness on the consumer side of the house from the economy," Stephenson said, according to a transcript of the event.

While he acknowledged that all consumer services are being affected, Stephenson said that wireless hasn't been affected as much.

"As the economy gets soft, wireless starts to become the last thing" that consumers let go off, he said. "And traditional access lines become one of the first...."

This trend suggests a shift in how people view their cell phones. In the past during financial hard times, people would do all they could to keep their landline phone. But now it appears that people are more dependent on their wireless phones. As a result, they may cut their landline phone at home to save money.

Stephenson's news, which some fear is another sign that the U.S. economy is heading toward a recession, was enough to also hurt some of the other major phone companies too.

Verizon Communications, the second largest phone company after AT&T, fell 2.73 percent to close at $41.75. Qwest Communications International saw its shares dip 5.82 percent to $6.15. And shares in wireless operator Sprint Nextel fell 3.24 percent to $12.53.

About the author

Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie.
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